Is Arizona the Future of American Cannabis?

by Mateo Pimentel / November 14th, 2014

A story grows in Arizona. The state’s legal landscape shifted drastically in 2010, when voters marginally succeeded in legalizing the Arizona Medical Marijuana Act (Prop 203, commonly). According to CNN reports at the time, the Arizona ballot measure—to legalize the consumption of medical marijuana—passed with only 50.13 percent of the vote. Prop 203 was effectively the only ballot to eek through the citizens-initiative process. Marijuana, however, was no stranger to the AZ ballot four years ago. In the mid-to-late 1990s, voters twice attempted to pass initiatives. Technical errors with wording resulted in the laws’ inability to protect patients from arrest. Then, in 2002, the legalization of small quantities of marijuana was refused. When things changed in 2010, Arizona became fertile soil for potentially leading other American states in cannabis cultivation.

I interviewed a close friend who works deep inside Arizona’s medical marijuana industry and spearheads the marijuana revolution. First, he addressed the nationwide shift in the legal landscape of medical marijuana, deeming it “inevitable.” Coupled with great timing, the design of Arizona’s prop system allowed voters to pass what friend labeled a “loosely, and frankly poorly written Prop 203.” He noted that legislatures in other states have since fought to tighten limitations on products and facilities (“concentrates,” “edibles,” the size of grows, etc.). My source also broached the “inability to go back and change the proposition,” as the reason for Arizona being locked “in a loose system, with marginal oversight.” This legal status lends itself to the foreseeable longevity of cannabis, and the future marijuana industry, within Arizona. Of course, there always exists the possibility that the federal government will make marijuana (in its entirety) a states’ rights issue. Incidentally, this seems the direction favored by many marijuana exponents. Should something of that magnitude blossom, then Arizona already plays a pivotal role in pruning that historic outgrowth.

Thanks to Prop 203’s passing in 2010, Arizona’s newest medical marijuana measures include many alleged freedoms for patients. The terminally, or seriously ill, may use marijuana with a doctor’s approval. They are also supposed to have protection from legal prosecution, or arrest, which they would otherwise risk by simply taking their physician-advised medicine. With strictly regulated and controlled clinics, patients and caregivers may use qualifying permits to purchase their medicine safely, rather than seeking products from illicit sources. Additionally, if patients/caregivers do not have access to a medical marijuana clinic within 25 miles, they may cultivate marijuana for medicinal use. Of course, as far as the general public is concerned, commonsense limitations and prohibitions on public consumption remain intact. What is more, registration measures are to help ensure that law enforcement can easily distinguish legitimate patients from fraudulent users. Nonetheless, federal limitations still play their part.

One major economic byproduct of Prop 203 legislation has been the physical and productive proof that Arizona is the frontier of American cannabis. According to my source, Arizona houses a 400,000 square-foot green house, which grows medical marijuana in the southern part of the state. He claimed this facility arguably houses the “biggest known grow in America.” Colorado, for one, certainly poses an obstacle to Arizona’s maverick position in pioneering marijuana’s future; however, my source was quick to cite the strict rules and limitations in place in Colorado. He explained that growing year-round is not the most lucrative option. “They obviously grow indoors all year,” he said, “but growing indoors is expensive, and the yields are less.” He predicted that facilities in Arizona will most likely outpace production in Colorado for this selfsame reason. Climate differences make a sizeable difference on such epic scales. In Arizona, argued my source, interested parties could “use more of the product for the research and development of new products.” Such a boon to research and development would only boost Arizona’s countrywide cannabis competitiveness.

There are many other factors to consider when looking at the future of cannabis, and Arizona’s particular potential. Facilities are expensive to build, for one, and securing outside financing proves next to impossible. My source reported that Arizona will become an industry “powerhouse” within five years—especially after “prop legalization in 2016.” Voters statewide already anticipate marijuana on the 2016 ballot. Of course, Arizona’s state legislature could draft a legalization bill all their own, and altogether hijack control of the industry beforehand. My source bluntly observed that although this could transpire, Arizona is simply “too backwards for it to happen.”

Yet another compelling part of this revolutionary epoch in cannabis history is the isolation of current key players, and those who might contribute to the marijuana frontier in the future. “Experienced businesses know how to hide their involvement with other businesses through subsidiaries,” said my source. Major businesses, he explained, may not themselves be directly involved in current cannabis products, but they do take a serious interest and ramp-up in the meantime. He cited the likelihood of some major corporations having “teams of researchers and scientists” already on the job. Firms such as Budweiser, Monsanto, Phillip Morris, he noted, all have the money to become what my source described as “overnight players.” There are also European entities hoping to gain easy and immediate entry to the medical marijuana market, too. Hell, the US government alone holds the official patent on cannabinoids—a most valuable plant element. It would seem that even the token powers that be are interested in marijuana.

Larger economic forces are obviously at work. The informal economy, which can prove an obstacle to the profitability of any regulated industry, also continues to strongly affect the future of cannabis. Arizona, itself, sits geographically close to many illicit organizations, which are well accustomed the serious profitability of illicit marijuana sales. My source explained how the black market will stay strong until large, regulated firms can boost production to a scale that will drive costs down significantly. For now, medical and legalized marijuana remains a looming specter, which haunts the future of illicit revenue. Cartels might certainly augment their production to stay competitive, but even within the confines of regulated markets, there are already reports that substitute products (like alcohol) have experienced major backslides in sales since legalization in Colorado. It goes without saying: a lot of money is at stake for all interested parties—legal or other.

My source projected that a healthy legal industry worth a few billion dollars will snowball into a robust market worth tens of billions more. He identified that, while there are undeniable medical benefits to cannabis, there are always negative consequences for anything that can make way for vice. Some of those who currently profit from medical marijuana sales also deliberate whether or not marijuana should be made readily available for recreational consumption. Currently, what transpired in Arizona vis-à-vis medical marijuana in 2010 has rendered negative effects for cartels. My friend explained that “they make a majority of their profit on illicit marijuana sales,” noting that the legalization of medical marijuana has “forced them to improve quality without changing or lowering the price, and reduced overall demand.” Thousands of tons of medically-grown marijuana, he claimed, also get “pushed out the backdoor and into traditional illicit markets.”

This, however, is a national issue that goes well beyond the scope of Arizona. Moreover, full, nationwide legalization could bring Arizona’s obvious momentum to a grinding halt. California, a potential competitor for Arizona and one of the world’s largest economies, already grows a substantial majority of the fruits, vegetables, and nuts consumed in America. Massive grows of cannabis would prove much more effective in California’s valleys than in the Arizona deserts. The economic upside from added-value to better, larger California grows seems obvious enough. And without current federal restrictions, California could easily become the alpha and omega of the marijuana industry. For now, though, Arizona green-lights its ambitious fecundity for the future of American cannabis.